Many studies focus on the consequences of globalization for less educated workers in manufacturing. Q: Could you describe who the poorest people are in these countries? This might impede mobility across regions. For example, the poor in these countries often don’t have access to formal insurance and a social safety net, so they rely on family networks for these services. Oftentimes, it goes beyond the financial cost of moving. But that is not occurring as fast as we would like because worker mobility in many of these countries is quite constrained. These are short-term costs of globalization, and over time you would hope that these workers would be able to move toward the exporting sectors and share in the benefits of globalization. When the tariffs were eliminated, these unskilled workers were disproportionately affected by declines in industry wages. Many countries, such as Mexico and Colombia, had shielded industries that employed a high share of less educated workers. However, workers who were employed in sectors that were initially shielded by higher tariffs experienced a drop in relative wages as tariffs were eliminated. Workers, both educated and less educated, in export-oriented sectors tend to benefit. The effect that trade has on less educated laborers in these developing countries depends in part on where they are employed and how mobile they are across sectors. The extent of the increase varies somewhat from country to country, but the evidence suggests that the more educated are benefiting more from the trade reforms than the less educated.īut greater inequality doesn’t necessarily mean greater poverty. And what that literature has found in India and in many Latin American countries is that inequality between the more educated and less educated has increased. Recent research has focused on how trade can affect inequality and poverty by affecting relative prices of goods and wages of individuals. But another way of looking at the consequences of globalization for poor countries is to actually look at how workers in these countries were doing prior to globalization and compare that to how they are doing now. We often find that wages are lower than similar workers would be making in a country like the United States and working conditions are worse. Oftentimes, when we try to look at what globalization has done for the poor, we focus on workers in developing countries: what types of factories they work in, and what wages they earn. ![]() It’s very country-specific, and it depends on where countries started off and on the nature of trade reform. Q: When you look at particular countries, how much variation are you finding in the effect of increased trade? And we have no evidence that trade leads to increases in poverty and declines in growth. It is thus really hard to tease out the effects of globalization on poverty in a broad sense.īut, that said, it is virtually impossible to find cases of poor countries that were able to grow over long periods of time without opening up to trade. Another challenge is that high-quality data on the well-being of the poor is often not available. ![]() One challenge is that when trade or globalization happens, many other factors are changing, such as technology and macroeconomic conditions. It has been a bit trickier, especially with aggregate data, to pinpoint how exactly the poor have been benefited. The usual argument goes that the benefits of this higher growth trickle down to the poor. What researchers have found is that, in general, when countries open up to trade, they tend to grow faster and living standards tend to increase. We observed big increases in trade flows as a result.Įconomic growth is the main channel through which globalization can affect poverty. ![]() For example, India implemented trade reforms in 1991, and its average tax on imports dropped from over 80% to an average of 30% in the late 1990s. During the 1980s and 1990s, many countries decided to abandon these protectionist policies and implemented large-scale trade reforms. If you look back over the past 30 years, developing countries had very high levels of trade protection - so they had high barriers on imports in terms of taxes, and they restricted imports quantitatively, by quotas or licenses. I first want to clarify what I mean by “globalization.” It’s an all-encompassing concept, and the aspect of globalization that I focus on in my work is international trade. Q: Is there a way to describe, in a broad sense, what impact globalization has had on the poorest people in underdeveloped countries?
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